F.I.R.E.? Or F.I.Re.@Will?

I imagine most people who have read or seen anything about personal finance in the past few years have heard of the so-called F.I.R.E. movement. This stands for Financial Independence Retire Early (or variations of that) and is often cited as a goal of folks in their 30s and 40s to leave the workforce as soon as possible and enjoy a long retirement. Many of those plans have hit some major speed bumps in the past year or so with very high inflation and stock market gyrations creating havoc with financial projections. More recent stories about F.I.R.E. enthusiasts indicate that some of those who did the R.E. part of the movement are finding out that the F.I. part is not holding up and they are heading back to the workforce.

But this is not intended to be a criticism of the F.I.R.E. movement. I don’t work with early retirees, only those who have a more traditional retirement path to transition (in some fashion) from their careers to what’s next. Generally, these clients are in their 50s and 60s, and many of them are fortunate to be military or Federal civil service retirees (or both!) and have cost of living adjusted lifetime pensions to provide a solid foundation of retirement income.

What I discuss with my clients is not the F.I.R.E. concept, but rather what I have dubbed the F.I.Re. at Will plan. I spent 22 years as a Naval Officer and have incorporated a lot of nautical ideas into my practice—starting with the name of the firm, Safe Harbor Financial Advisors. Anyone who has seen a World War II movie that involved a naval battle has probably heard the term “fire at will” as the order given for the ship’s guns to commence a devastating attack. The classic image is of a battleship with all 9 barrels of its giant guns firing at once in an amazing broadside.

While admittedly a bit of a stretch, I did think of that image in coming up with my own retirement planning concept, F.I.Re. at Will. What I mean by this is that the initial key to success in terms of retirement planning is to reach a point of financial independence, the F.I. here as it is in the F.I.R.E. movement. But then the Re. simply means retirement, with the next part, at Will, being the critical element to the plan. Once a client has reached the point of financial independence (whatever that means for them—more below), they have the ability to retire or transition whenever they want, at will. That is a very freeing concept for my clients and opens up a world of possibilities.

So what does it mean to be financially independent? As I tell my clients, the most expensive words in my vocabulary are “it depends!” And the financial independence definition for each client depends on their personal circumstances, their goals, their spending projections, geographic location, life expectancy, and many other factors. One definition of financial independence is the status of having enough income or wealth sufficient to pay one's living expenses for the rest of one's life without having to be employed or dependent on others.

Breaking that definition into its key concepts you have 1) enough income (or wealth generating income); to 2) pay your living expenses; 3) for what could potentially be a long time (the rest of your life); 4) without needing to be employed for income or relying on the support of others.

Needless to say, this seemingly simple formula gets very complicated as soon as you start looking at each element. For example, determining current living expenses can be a challenge in itself for some folks, and then projecting future expenses, plus inflation, plus one-time or periodic larger expenses, plus…. You start to see problems of the cash flow approach to retirement income planning. But it is still the most successful way to determine retirement readiness in my view and that of many other financial professionals.

Some of you may remember those TV commercials with folks walking around with cartoonish oversized dollar amounts that supposedly represented the amount of money they needed to retire. While there may indeed be a “number,” it is not the amount of money you have that is the critical factor, it is whether that amount will generate the income you need, in addition to other sources of income, to pay your living expenses for the rest of your life. One of the versions of that commercial series has a guy with his number being a Gazillion. Even if that were an actual amount it would not, by itself, answer the F.I. question.

So what is your retirement number? Have you reached your F.I.Re. at Will point? Do you have your own amount of “enough” to support your retirement lifestyle for as long as you live without fear of running short?

If you don’t know or are not sure, it is time for you to seek the guidance of an experienced financial professional, preferably one who is not focused on the sale of financial products. A financial professional who is a fiduciary, looking out for the best interests of the clients and fully disclosing any actual or potential conflicts of interest or biases, is a better choice. But then again, I am biased here (and am fully admitting it!) since I am a fee-only fiduciary who does not sell financial products. And I only work with folks who are at the point of determining whether they have reached the ability to F.I.Re. at Will or need to make some course changes to get to that point (or stay there).